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The Pakistani rupee was Asia’s worst performing currency in 2022.

The Pakistani rupee was Asia’s worst performing currency in 2022, falling more than 16.5% against the US dollar and ranking last among 13 peers, including the Japanese yen, South Korean won and taka. from Bangladesh.

The local currency fell further despite Finance Minister Miftah Ismail’s assurance to the general public on Monday night that the International Monetary Fund (IMF) will start its $6 billion lending program in a day or two.

Before rebounding later in the day, the rupiah plunged to an intraday low of Rs212.21. According to the State Bank of Pakistan, the closing price of the Rupee on Monday against the US Dollar was Rs 209.96 (SBP).

Compared to the close of June 30, 2021 (Rs 157.54), it has lost 34.23% of its value (or Rs 53.94) over the past year. According to a local media site, the local currency has registered the weakest performance in the current calendar year against 12 peer regional nations.

The Japanese yen has lost 15.50% of its value so far this year, trailing the rupee by a margin of 16.50%. Hong Kong dollar, Singapore dollar, Indonesian rupiah, Indian rupiah, Chinese yuan, Malaysian ringgit, Thai baht, Philippine peso, Taiwan dollar and South Korean won were among the other regional currencies which saw declines in the range of 0.68% to 8.10. percent.

Analysts said the extended postponement of the IMF lending program and the country’s continued loss of foreign exchange reserves have both contributed to the sustained decline in the rupee. The Rupee has fallen significantly from its estimated fair value of Rs 190 against the US Dollar.

A worsening balance of payments problem is indicated by the decline in reserves below $9 billion. The other day, a few commercial banks said they had run out of US dollars to pay for imports. The statement sent the rupee plummeting.

However, the central bank made it clear on Tuesday that neither the central bank nor commercial banks are experiencing currency shortages.

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The rupee has lost 5.1% of its value since June 8 alone, as the country’s economy suffers from the prolonged delay in restarting the International Monetary Fund (IMF) bailout program and dwindling foreign exchange reserves , which also caused the government to change hands in the middle. of the first semester.

The Rupee’s interbank closing price on Tuesday was 211.48, down significantly from its December 31, 2021 closing price of 176.51.

According to statistics collected by Business Recorder, the yen (down 15%), won (8.1%) and taka (7.22%) were just behind the Pakistani rupee. The Hong Kong dollar, Singapore dollar and Indonesian rupiah were the best performing Asian currencies against the US dollar.

The value of the rupiah declines as Pakistan grapples with a growing current account deficit, its lowest level of reserves held by the central bank since November 2019 and a prolonged delay in restarting the IMF program which was suspended due to of the change of administration.

While the new coalition partners continued negotiations with the Washington-based lender last month, the IMF delegation concluded its talks with Pakistani officials without discussing the Extended Financing Facility (EFF).

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Instead, the IMF said that to achieve program objectives, deviations from policies agreed at the last review require urgent and specific policy changes, including the removal of fuel and energy subsidies. and the budget for fiscal year 2023.

Since then, despite growing concerns about inflation and slowing economic development, Pakistan has embarked on a difficult economic path that has seen gasoline prices rise three times in less than three weeks and subsidies on Electricity bills removed.

The State Bank of Pakistan has decided to reduce the cash reserve ratio restrictions on FE-25 deposits for some banks due to the growing demand for US dollars in the interbank market at the same time as the rise in the price of oil on the world market has added to the pressure.

Calming markets on Monday, Finance Minister Miftah Ismail said he was confident the IMF program would be reinstated within a day or two. The KSE-100 index posted a 1.8% gain on Tuesday following his remark and other bailout resurrection rumors, which helped support the national stock market. The rupiah continued to fall, registering its eighth consecutive decline against the US dollar.

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The IMF program is seen as crucial for Pakistan as many believe it will open up financing opportunities from other sources and help Pakistan’s foreign exchange reserves, which have fallen by more than 50% in the last ten years. month.

The IMF program is seen as crucial for Pakistan as many believe it will open up financing opportunities from other sources and help Pakistan’s foreign exchange reserves, which have fallen by more than 50% in the last ten years. month.

To bolster its foreign exchange reserves, Pakistan secured a $3 billion deposit from Saudi Arabia in December. In addition, as part of its new Special Drawing Rights (SDR) allocation, which was announced in August, Pakistan also received a further injection of around $2.8 billion from the IMF.

It was aggravated by the uncertainty surrounding the restart of the IMF program. Although a staff-level agreement for the sixth review has already been made public, the IMF’s executive board will not meet until January 12 this year to consider the fate of the expanded financing facility.

After approval, one billion dollars would come in. But rather than the inflow itself, the IMF clearance is more likely to “chill” the currency market.

Boston claimed that if the government and SBP had not taken steps to reduce speculation in the market, the PKR would have fallen below 200. Hashmi held similar views. Hashmi expressed optimism that the import bill will decline in February or March and added, “The impact of equities will be apparent in the coming months.”

one american dollar with different pakistani rupee banknotes - picture of america, debt: 179846639

Hashmi went on to say that Pakistan needs the IMF program revived. “The IMF decision will not only provide $1 billion, but it will also open the door to money from the World Bank and other international donors, such as the Asian Development Bank. The pressure of the current account deficit will be offset.

If Pakistan implements an earlier action plan that includes tax changes as part of a broader structural reform package that includes everything from power sector debt to corporate governance, to climate change and trade policy, the IMF program would be reinstated.

Edited by Prakriti Arora